Nissan revs up before earnings

Analysts expect operating profits to rise 8% on U.S. gains

By

AllenWan

TOKYO (CBS.MW) -- Nissan Motor bucked the overall market trend Wednesday with gain of almost 4 percent on expectations that the Japanese automaker will post solid growth in first-half earnings as a result of bullish sales in the United States.

Analysts expect Nissan's
NSANY, -5.85%
operating profits to have risen around 8 percent in the March-September period from year-ago levels to 375 billion yen ($3.44 billion), according to a survey by Toyo Keizai.

Goldman Sachs analysts say that they expect Nissan to post a profit of 374.7 billion on the back of surging sales in the United States.

"The company appears to have achieved continued yoy profit growth by offsetting the costs related to the start-up of the new factory in Canton, Mississippi, with an increase in unit sales and an improvement in the product sales mix (mainly in North America)," said Goldman, which also maintained its "outperform" rating on Nissan stock.

In fact, all three of Japan's top automakers, including Toyota
TM, +0.15%
and Honda
HMC, -0.57%
are expected to report record sales in America this year, though the strong yen could stall the rising momentum in the months ahead.

A recent Nihon Keizai Shimbun report said that Japan's top 3 automakers expect combined new U.S. car sales to reach a record 4.04 million units in 2003, marking an 8 percent rise over 2002 sales.

Toyota Motor expects to account for half of the sales, or 2 million vehicles, while Honda Motor is projecting sales of 1.38 million vehicles and Nissan is targeting sales of 812,000 units.

Lehman analyst Clive Wiggins said in a recent note that Nissan could be better positioned to deal with currency fluctuations once the automaker completes construction of a Mississippi manufacturing plant. Until then, Nissan is vulnerable to swings in the dollar/yen, with each one yen rise costing the company about 11 billion yen of operating profit.

"Were it not for the recent sharp appreciation of the yen, we believe that Nissan would very likely have raised its full-year earnings guidance in the wake of a very strong U.S. performance."

The dollar stood at around 109.16 yen in afternoon Tokyo. Analysts estimate the breakeven point for the automakers at around the 115 yen level.

On Wednesday, shares of Nissan gained 3.8 percent to 1,297 yen, while those of Toyota lost 1.7 percent to 3,390 yen and those of Honda sank 1.8 percent to 4,400 yen.

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